The Battle of the Microbrews

Once upon a time in central New Jersey, locally-made alcoholic beverages meant “Champale.” When that malt liquor producer moved away in 1986 and closed its Trenton factory, there was little to take its place. But in the last decade, and especially since 2012, small breweries, vineyards, and distilleries have exploded in New Jersey, catching up to a national trend. The proliferation of small alcohol producers has only accelerated in recent years, thanks to changes in licensing laws that slashed costs for small producers, allowing distillers to buy a license for just $930 and brewers to get in at $1,000. There was one distillery in New Jersey in 2013, and now there are more than 10. In 2007 there were fewer than 10 breweries statewide, and now here are 85.

Mercer County is home to River Horse brewery in Ewing, Triumph brew pub in Princeton, Hopewell Valley Vineyards, and Terhune Orchards. In Hopewell, Brick Farm Tavern is supplied by Sourland Mountain Spirits and the Troon brewery, both opened in 2016, right next door, and nearby is he Referend Bier Blendery, which opened the same year.

The expansion continues apace, with the Common Sense Brewery having just opened in Bordentown over Labor Day weekend.

Unique in that group is Triumph, which became the state’s first purpose-built brew pub when it opened in 1995. Brew pubs are allowed to both produce beer and serve food on-site. Key to the financial success of brewers is that they are allowed to serve the alcohol they produce on-site at their breweries as long as they offer a “tour” of the facilities to customers. Now the brewers are lobbying to have the law changed so the “tour” is no longer required.

Marshall Kizner, a Stark & Stark attorney who represents several microbrewery clients, admits that the tour is usually a perfunctory exercise. More often than not, the tour consists of simply handing out a card or having a video that plays on a TV in the tasting room, or just saying something like “We have beer here. It’s made with hops. I hope you enjoyed the tour.”

The reason for the less-than-informative tours is that while the law requires a tour, it doesn’t actually specify what a tour is. Kizner adds that giving a real tour to every customer would be impractical. “It’s impossible,” he says. “If you have 100 people come in, you can’t give 100 tours.”

The tours are the result of a requirement enforced by the Alcohol Control Board, which views the microbrewery business a bit differently than the brewers do. “The ABC takes a very conservative approach,” Kizner says. “They say microbreweries are really manufacturers, and this is a manufacturing license. They look at the tasting aspect of a brewery as though it should be ancillary to the manufacturing. Brewers and distillers want to highlight the tasting element and the fun you can have at the brewery and distillery.”

A bill introduced in the state legislature in February would resolve this dispute permanently in favor of the brewers by eliminating the tour requirement completely. The measure is fiercely opposed by the hospitality industry, since restaurants have to pay dearly for liquor licenses, often up to $1 million, while breweries can serve alcohol in their tasting rooms for next to nothing. In protest of the proposed bill, about 10 pubs in central and south Jersey have boycotted craft beer made in New Jersey.

The same objections have also kept breweries from being allowed to serve food, although wineries don’t have that restriction.

Kizner says it is also common for the ABC to step in and quash microbrewers when they hold special entertainment events like showing a sporting event on TV or hosting a trivia night.

Other pending laws could make life even better for microbrewers. At the national level, the Craft Beverage Modernization and Tax Reform Act of 2017 would lower excise tax rates for breweries from $7 a barrel to $3.50 a barrel for the first 60,000 barrels made, and from $30 to $18 for the first 6 million. “It makes it so much cheaper for a small business to really get started and generate income,” Kizner says.

Laws favorable to microbrewers and distillers are one factor driving the growth of the industry, but market forces are also turning in favor of small, local brewers. Market researchers say young adults prefer the experience of going to a brewery and having a few beers with friends to buying cheap beer at a liquor store and taking it home.

Kizner, who grew up in Vineland, where his father is an attorney and his mother a social worker, has specialized in representing small alcohol producers since 2012, when Stark & Stark saw the rapidly growing industry could use legal representation. He says the most common disputes arise when breweries or distilleries want to have some kind of special event, and then the ABC steps in to stop it.

The growth of microbreweries shows no signs of slowing. Nationwide, the number of breweries has tripled since 2006, and the Craft Brewers Association expects 2.5 percent growth next year.

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